Credit Products Linked To Nascent Sub-Indices Ready Takeoff

Credit derivatives professionals are seeing initial interest for options and tranches linked to the recently launched credit sub-indexes in Asia and expect the first deals to hit within the coming weeks.

Credit derivatives professionals are seeing initial interest for options and tranches linked to the recently launched credit sub-indexes in Asia and expect the first deals to hit within the coming weeks. "Funds are looking at this as a way to hedge bond positions, banking loans or CDOs," said an official at
JPMorgan.

The new sub-indices created on the back of the merger of rival credit indices TRAC-X and iBoxx include the Korea, Greater China and Rest of Asia products. "I don't think this will be huge, but we should start seeing some trades," said a credit trader, noting that first-to-default baskets on the sub-indexes have also been structured in recent weeks.